HYDERABAD: Stating that the GST regime has increased the say states have in the taxation regime by way of the GST Council and marks a significant change in the federal polity structure of India, Karimnagar MP B Vinod Kumar asked the 15th Finance Commission to take into consideration the fact that all the three levels of panchayat raj system receive central funds for effective administration at the lowest levels.
In a letter to chairman of 15th Finance Commission, Nand Kishore Singh, the MP said the 14th Finance Commission recommendations included increase in share of states of the divisible pool from 32% to 42%. Article 280 of the Constitution of India provides for what comprises this divisible pool. Keeping in mind the circumstances and the reasons given while making the recommendations in 2015, the introduction of GST and the subsequent compensation flowing from Centre to states coupled with the removal of cesses on indirect tax will certainly have to be taken into consideration in latest iteration of Finance Commission Report, i.e. 15th Finance Commission Report due in 2019.
Vinod Kumar said the Panchayati Raj system in India consists of three tiers with the zilla (district) at the top followed by mandal/block and finally the gram/village level. What the Report suggested is grants being paid directly to the lowest level i.e. gram level, with no funds being channelled to the zila and mandal levels. This resulted in a sudden drought of funds for the top and middle tiers, and a flood of funds for the lowest level. State Governments were required to provide for the top and middle tiers. The implementation of GST has hampered the revenue of State Governments which is why the Centre has accounted for compensation for the coming few years. This underlines the financial stress that State Governments face.
Taking away the grants from the Centre and leaving the zilla and mandal levels at the behest of the State Governments has resulted in serious problems in the functioning of the panchayat machinery in the States.
``There is a direct threat to the Panchayati Raj system that has been envisioned under Part IX of the Constitution of India. For the purposes of effective administration at the lowest levels, it is important that all three levels under the Panchayati Raj system receive funding. Therefore, I urge you to take this matter into consideration while drafting the 15th Finance Commission Report,’’ the MP said.